Making Medicines Accessible: Alternatives to the Flawed Patent System

Fran Quigley

Introduction

The flaws of the modern medicine patent system are widely decried. The current system fails to develop medicines to address the health needs of the global poor and creates a platform for unaffordable pricing of the medicines that exist. But even the harshest critics of the patent paradigm recognize the need to provide incentives for vigorous research and development of new medicines. Many alternatives have been proposed. Some are already in operation at limited levels. But these alternatives are poorly understood, even in the global health community.

This article provides a brief review of the grievous defects in the medicine patent system and then summarizes the alternatives. Given the brevity of this essay, the aim is to be broad rather than deep, and a thorough evaluation of the advantages and disadvantages of each reform proposal is beyond this article’s scope.¹ However, it is important for global health advocates to be familiar with these alternatives to the current medicine patent system.

The problem with medicine patents

Like a poorly conceived new drug with deadly side effects, the modern medicine patent regime is a relatively recent innovation and, not a good one. Although pharmaceutical patent laws can vary between nations, the 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) created a near-uniform global system. This system is designed to incentivize innovation by rewarding inventors of new medicines with government-granted monopolies known as patents.² During the monopoly period, usually 20 years, the patent holder can produce the medicine and charge whatever price the market will bear, without fear of competition. Since medicines are necessary to life and well-being, high-income markets usually bear high prices. Yet medicines are typically inexpensive to manufacture.³ As a result, the modern pharmaceutical industry is one of the most profitable sectors in recent history.⁴

One core flaw of the medicine patent scheme is that it motivates innovation only if potential patent-holders anticipate that the developed medicine will be sold at high prices. For example, the patent system incentivizes development of drugs for male pattern baldness, which will sell vigorously in comparatively wealthy countries. But the system fails to motivate research and development of medicines to combat the diseases that sicken and kill millions of the global poor.⁵ Under the patent regime, erectile dysfunction and acne drugs proliferate. Yet only one new drug has come on the market in the last half-century to treat tuberculosis, a disease which killed 1.5 million people in 2013.⁶ Nor does the current system lead to wide availability and affordability for many existing drugs:10 million people die each year for lack of access to medicines.⁷

Even for the medicines that address the health needs of persons who can afford high prices, the patent system fails to spur innovation effectively. When rewards are contingent on exclusivity, research is conducted in secretive silos. Open-source innovation is unthinkable. Just as disturbing, the patent profit motive leads to resources being devoted to the development of “me-too” drugs, created in the effort to carve out a share of the high-income market for blockbuster medicines.⁸ Over 70% of medicines brought to the market in the last two decades provided no new therapeutic benefit over the products already available.⁹ A marketplace saturated with different brands of similar drugs helps trigger the industry expenditures on sales and advertising that are so large they exceed its investment in research and development.¹⁰

It is therefore no surprise that the medicine patent system has come in for criticism, especially by human rights agencies and advocates. The World Health Organization regards the situation as a health rights concern and has concluded that “(i)nequality and discrimination in access to essential medicines remain the key public health challenge of our times. Some critics call for the pharmaceutical industry to devote greater resources to the needs of the poor, while others question whether discovery and distribution of life-saving medicines should be a for-profit enterprise at all.¹¹ National constitutions, courts and international agencies increasingly characterize access to essential medicines as a human right, not a commodity to be purchased by a fortunate few.¹² Resistance to monopoly medicine protections in the pending Trans-Pacific Partnership Agreement threatened to derail negotiations over the largest trade deal in history, and may yet block its approval in national legislatures.¹³ Even in the US, home to many of the world’s largest pharmaceutical companies and the tenacious defender of medicine patents on the global stage, condemnation of monopoly drug pricing is on the rise. As costs skyrocket for patented medicine for diseases like cancer, hepatitis, and multiple sclerosis, calls for reform have come from US physicians, presidential candidates and the public.¹⁴

Yet widespread frustration with the medicine patent system has not yet been matched by enthusiasm for specific proposals to replace it. These proposals certainly exist, and some are even in operation to limited extents. The following descriptions of “Plan B” alternatives proceed along a continuum, beginning with ideas that would cause the least disturbance to the current system and advancing toward more radical concepts.

TRIPS flexibilities

The TRIPS agreement represented an historic advancement of the patent paradigm. Monopoly protection for medicines became the law in many nations that had previously treated medicines as a public good off-limits from private profiteering.¹⁵ But TRIPS did include several substantial exemptions from patent protection, exemptions that came to be known as “flexibilities”. TRIPS flexibilities allow for a detour around patent-erected barriers that otherwise block access to many critical medicines, yet full embrace of these flexibilities would not change existing international intellectual property law.

The central TRIPS flexibility is found in Article 31 of the agreement, which allows governments to issue compulsory licenses for patented drugs.¹⁶ Compulsory licenses permit the manufacture and sale of generic medicines, presumably at prices far lower than the patented versions,with remuneration paid to the patent holder. TRIPS also allows governments to engage in parallel importation of generic medicine manufactured elsewhere.¹⁷ The 2001 WTO Doha Declaration underscored the availability and importance of these flexibilities for use in responding to public health needs.¹⁸

TRIPS flexibilities have been employed to significantly increase access to medicines in India, Colombia, Indonesia, and over 50 other nations that have produced or procured generic HIV/AIDs medications.¹⁹ However, since TRIPS and Doha, the US Trade Representative and the pharmaceutical industry have pushed for bilateral and multilateral trade agreements, known as “TRIPS-Plus Agreements,” that narrow the availability of these non-patent options.²⁰

Many access to medicine advocates consider TRIPS flexibilities to be significantly under-utilized in low and middle-income countries. For example, the Fix the Patent Laws campaign in South Africa urges expanded use of TRIPS flexibilities.²¹ Thus, the featured reform in this category would be a significantly broader embrace of the patent exemptions already available under international law.

Curbing the pharmaceutical industry

Like the use of TRIPS flexibilities, this category of reform would leave the current patent regime in place. Chiefly generated by US advocates and politicians, these ideas focus on the nation with the most unregulated medicine market and, not coincidentally, the highest drug prices in the world.²² They include repealing a 2003 law prohibiting the US Medicare system from negotiating the price of purchased drugs.²³ Other proposals call for legal importation of medicines to the US from Canada, where prices are far lower.²⁴ Noting the significant discrepancies between the pharmaceutical industry’s self-reporting of research and development investment and independent analyses of that investment, multiple US lawmakers, along with the Parliamentary Assembly of the Council of Europe, have called for laws to require greater cost transparency.²⁵ Other proposals include limitations of tax deductions for corporate spending on drug marketing.²⁶

Push incentives for medicine research and development

Any alternative to the current system must provide sufficient incentives for the research and development of new medicines. Most comprehensive reform proposals aim to provide those incentives by some combination of “push” and “pull” mechanisms.

Push incentives include grants or other subsidies offered to innovators at the early stage of medicine research. The most prominent example of push funding is the substantial investment by the US National Institutes of Health (NIH), which provides $30 billion annually in government funding for medicine research.²⁷ Included in the long list of NIH success stories is the funding of the research that led to the anti-retroviral medicines that revolutionized the treatment of HIV/AIDS and saved millions of lives worldwide.²⁸ In total, government funding and philanthropy provide 40% of total medicine research costs.²⁹

Smaller but more targeted push funding includes the Drugs for Neglected Diseases Initiative, a not-for-profit collaboration among the public sector, academia, nongovernmental organizations and for-profit companies. Under the DNDI umbrella, this coalition spurs research and development for neglected diseases.³⁰ Also in the push category are government-provided tax credits for pharmaceutical companies, credits that are sometimes increased to reward research that addresses diseases with limited profit potential.³¹

Pull incentives for medicine research and development

Pull funding usually focuses on the later stages of the research and development process. The most widely discussed pull proposals center on offering significant prizes to innovators who discover and develop a valuable drug.³² There is a long history of prizes being used to spur innovation—architectural design prizes date back to the 15th century; Charles Lindbergh’s famous 1927 trans-Atlantic flight earned him the $25,000 Orteig prize.³³

In fact, the current medicine patent system is itself a prize model. The problem is that the prize of monopoly markets is one that fails to incentivize development of medicines that address the diseases that plague the global poor. Therefore, most modern medicine development prize proposals include, as a condition of acceptance, release of any monopoly rights to the medicine.³⁴ The expectation is that resulting open-source development of prize-induced medicines will lead to the type of low-cost manufacturing and delivery innovations that characterize the current generic drug industry.³⁵

The Health Impact Fund is a prize proposal that has attracted high-profile supporters, including Amatrya Sen, Paul Farmer, and Peter Singer. The fund’s plan is to offer drug developers awards in amounts that correspond to the impact of their innovation on global health. In return for the prize, recipients surrender their monopoly pricing flexibility, and drug prices are more closely linked to the cost of manufacture.³⁶ The Health Impact Fund and most other prize proposals are still on the drawing board, but existing prize programs include a European Union prize for vaccines innovation, the National Health Service England Innovation Challenge Prizes, and the Longitude Prize for antibiotics.³⁷

Although there are examples of medicine development prizes that are funded by private philanthropy in whole or in part, substantial government investment will be necessary for prizes to replace the lucrative rewards of a patent monopoly. Reform proponents say that the government funding needed for prize systems already undergirds the current patent system, albeit with poor results. Governments pay at both push and pull stages already, in the form of public funding of research followed by high-volume government purchases of patent-priced medicines.³⁸

In the US, for example, Medicare and Medicaid programs now purchase many drugs at patent prices. Savings from the purchase of the same drugs priced at generic levels, within range of manufacturing costs, would more than offset the entire research and development expenditures reported by the US pharmaceutical industry.³⁹ Those savings could be devoted to significantly expanded government investment in medicine research, investment that would not be handcuffed by the current priorities of patent-seeking research. Further savings would be realized by the elimination of the need for medicine prices to be set high enough to recoup the cost of for-profit drug marketing. The five largest US pharmaceutical companies spend a combined $50 billion annually in marketing costs, an expense that gets passed onto medicine purchasers.⁴⁰

When a medicine is already developed and access is limited by monopoly pricing, the most straightforward response to ensure access for all is to simply buy out the patents and distribute the drugs at cost. But the value of a medicine monopoly in a high-income market is substantial, so the buy-out cost would be quite high. One approach to overcoming this problem is offered by the global health initiative UNITAID. Along with multiple partners, it supports a Medicines Patent Pool that negotiates partial license surrenders for holders of patents for HIV/AIDS medicines. It then grants licenses to generic manufacturers for distribution of the drugs in low-income countries, where the patent-holders would have made limited profits. The Pool has obtained licenses for 12 antiretroviral medicines, has worked with generic manufacturers to distribute over 2 billion doses of the medicine in over 100 countries, and recently announced plans to expand its efforts to hepatitis and tuberculosis medicines.⁴¹

GAVI, the Vaccine Alliance, offers another example of a concerted effort to lower the price of patented medicines. GAVI leverages funding from the Bill and Melinda Gates Foundation and other public and private sources to provide affordable vaccines in low-income countries.⁴² Other cost control approaches include global coordination of the procurement of patented medicine.⁴³ Advanced purchase commitments operate to pull drug development by guaranteeing a market for a medicine that may not otherwise appear profitable to an innovator.⁴⁴

Push-pull incentive combinations

Different stages of medicine research and development pose different challenges. Effective incentives to spur basic research may not work to motivate the launch of clinical testing. As a result, many reformers advocate for a combination of push and pull approaches. Médicins Sans Frontières is pursuing a “3-P” project—push, pull, pooling—to develop effective tuberculosis treatment.⁴⁵ The US Orphan Drug Act was introduced to spur research for diseases that either affect a small number of people, or for other reasons would not produce a significant profit for the manufacturer. The law provides an early-stage push, in the form of research grants and increased tax credits, along with a late-stage pull from government-granted market exclusivity for the resulting drugs.⁴⁶ Australia and the European Union have created similar push-pull mechanisms to stimulate research and development of medicines targeted at rare diseases.⁴⁷

Global research and development agreement

The most comprehensive proposal to reform the current medicine patent system is a global research and development agreement. In 2012, a working group created by the World Health Assembly, the decision-making body of the World Health Organization, issued a report proposing a binding treaty to enforce government funding of health-related research and development. The proposal called for all countries to spend at least 0.01% of their gross domestic product on neglected diseases.⁴⁸

Under the proposed treaty terms, 20% of this investment would be pooled at the international level, but some could be directed by individual nations toward early-stage research, prize funds, patent buy-outs, or other push-pull mechanisms. The treaty was designed to lay the platform for open-source development of the next generation of medicines. But US led opposition to the treaty during 2012 WHO discussions, and consideration of the proposal was postponed until the 69th World Health Assembly in March 2016.⁴⁹ In November, 2015, members of the international academic and scientific community issued a letter calling on WHO Member States to embrace the research and development agreement proposal, saying that the existing patent-avoiding mechanisms show potential but are fragmented and lack coherence.⁵¹

Delinkage of medicine cost from research and development cost

The global research and development agreement and push and pull mechanisms include substantial alterations to the current medicines patent model. But many of these proposals do not contemplate complete departure from the existing system. The Medicines Patent Pool, for example, does not disturb patent holders’ rights to charge monopoly prices in middle and high-income countries. Similarly, the Health Impact Fund aims for patent-free development and distribution of drugs for neglected diseases, but this would not affect patent holders’ ability to charge monopoly prices for medicines with high market values.

In contrast, some proposals call for the complete “delinkage” of medicine price from the cost of research and development. Instead, medicine price would correspond most closely with manufacturing cost. An example of full delinkage is the proposed Medical Innovation Prize Fund, which would reward innovations that impact public health while requiring the surrender of all monopoly patent rights.⁵² Delinkage proponents emphasize that the end of the medicine patent system would not mean the end of the private pharmaceutical industry, since effective drug innovators and efficient manufacturers would find ample reward via prizes and other incentives in a delinked system.lii Delinkage proposals are grounded in both the pre-TRIPS history of treating medicines as a public good, and the modern acknowledgement of a human right to health that is not dependent on a patient being fortunate enough to afford a medicine’s market price.

Conclusion

Alternatives to the modern medicine patent regime are not without complexities and challenges. Push funding requires rigorous compliance monitoring and cannot guarantee success in every effort to discover innovative medicines. For prize systems, it is not easy to determine a monetary value and terms that provide sufficient motivation for innovators, along with robust returns for the prize funders. But none of the possible limitations is a match for the present skewed reward system, which results in unacceptable levels of suffering and death.The medicine patent system produces toxic results, and health rights advocates need to support effective and equitable alternatives.

Fran Quigley, JD MA, is a clinical professor at Indiana University McKinney School of Law, where he directs the Health and Human Rights Clinic. Please address correspondence to the author at quigley2@iupui.edu.

References

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2 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), 33 I.L.M. 1197 (1994). Available at https://www.wto.org/english/tratop_e/trips_e/t_agm0_e.htm

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6 World Health Organization, Tuberculosis Fact Sheet (Geneva: WHO, 2015). Available at http://www.who.int/mediacentre/factsheets/fs104/en/

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11 Hunt, see note 7; J.G. Ruggie, Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework, UN Doc. No. A/HRC/17/31 (2011), p. 14. Available at http://www.ohchr.org/Documents/Issues/Business/A-HRC-17-31_AEV.pdf

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15 A. Mannan and A. Story, “Abolishing the product patent: a step forward for global access to drugs,” in Power of Pills: Social, Ethical and Legal Issues in Drug Development, Marketing and Pricing, Eds. J. Cohen, P. Illingworth and U. Schüklenk (Ann Arbor, Mi: Pluto Press, 2006) 183.

16 TRIPS Agreement, Art. 31, see note 1.

17 Ibid. at Article 6.

18 World Trade Organization, Ministerial Declaration of 14 November 2001, WT/MIN(01)/DEC/1, 41 I.L.M. 746 (2002), para. 5b. Available at https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.html

19 Ellen t’Hoen, The global politics of pharmaceutical monopoly power: drug patents, access, innovation, and the application of the WTO Doha Declaration, (Diemen, The Netherlands: AMB Press, 2009), pp. 44-62.

20 S. Sell, “TRIPS-Plus free trade agreements and access to medicines,” Liverpool Law Review 28 (2007), p.p. 64-74.

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23 Social Security Act, 42 U.S.C. 1395w-111, P.L. 108-73, Section 1860D-11.Available at https://www.ssa.gov/OP_Home/ssact/title18/1860D-11.htm

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26 Lorenzeti. See note 14.

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29 J-A Røttingen et al. “Mapping of available health research and development data: what’s there, what’s missing, and what role is there for a global observatory?” The Lancet (May 20, 2013). Available at http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(13)61046-6/fulltext?_eventId=login

30 Drugs for Neglected Diseases Initiative, “About Us” (2015). Available at http://www.dndi.org/about-us/overview-dndi.html

31 M. Kremer and R. Glennerster, Strong medicine, creating incentives for pharmaceutical research and neglected diseases, (New Jersey: Princeton University Press, 2004).

32 Knowledge Ecology International, Annotated bibliography of articles and books on innovation prizes, (Washington, D.C. 2012). Available at http://keionline.org/prizes/cites . Joseph Stiglitz. “Scrooge and intellectual property rights: a medical prize fund could improve the financing of drug innovations,” 333 British Medical Journal 1279 (2006). Available at http://academiccommons.columbia.edu/catalog/ac:148182

33 V. Goel, “Charles Lindbergh and the Orteig Prize,” Innovation in the Crowd (March 1, 2011). Available at http://www.innovationinthecrowd.com/2011/03/01/charles-lindbergh-and-the-orteig-prize/

34 J. Love and T. Hubbard, “Prizes for innovation of new medicines and vaccines,” Annals of Health Law 18/2 (2009), p.p. 155-186. Available at http://lawecommons.luc.edu/cgi/viewcontent.cgi?article=1111&context=annals

35 M. Tod, “In drug development, openness can compete with secrecy, given the chance,” Plos Blogs, (October 22, 2015). Available at http://blogs.plos.org/yoursay/2015/10/22/talking-drug-prices-pt-6-openness-vs-secrecy-in-drug-development-by-mat-todd/

36 Health Impact Fund, “A summary overview” (2015). Available at http://healthimpactfund.org/the-health-impact-fund-a-summary-overview/

37 European Commission, “German company wins EU’s €2 million inducement prize for innovative vaccine technology,” (March 10, 2014). Available at http://europa.eu/rapid/press-release_IP-14-229_en.htm. NHS England, “The NHS Innovation Challenge Prizes,” (2015). Available at https://www.england.nhs.uk/challengeprizes/ Longitude Prize, “Longitude Prize Open.” (2014). Available at https://longitudeprize.org/

38 A. Stephens et al., “The Role of Public-Sector Research in the Discovery of Drugs and Vaccines,” New England Journal of Medicine (Feb. 2, 2011). Available at http://www.nejm.org/doi/full/10.1056/NEJMsa1008268 B. Sampat and F. Lichtenberg, “What are the respective roles of the public and private sectors in pharmaceutical innovation?” Health Affairs (February 2011), p.p. 332-339. Available at http://content.healthaffairs.org/content/30/2/332.full

39 D. Baker, Financing Drug Research: What Are the Issues? (Washington, DC: Center for Economic and Policy Research, 2004).Available at http://www.cepr.net/documents/publications/intellectual_property_2004_09.pdf

40 See Anderson, note 4.

41 Medicines Patent Pool, Working today for the treatments of tomorrow: Annual Report 2014” (Geneva: Medicines Patent Pool, 2015). Available at http://www.medicinespatentpool.org/wp-content/uploads/MPP_Annual_Report_2014_web.pdf

42 GAVI. “About GAVI, the Vaccine Alliance,” (2015). Available at http://www.gavi.org/about/

43 Stop TB Partnership, “What is the GDF?” (2015). Available at http://stoptb.org/gdf/whatis/default.asp

44 R. Glennerster et al., “Advance market commitments for vaccines against neglected diseases: estimating costs and effectiveness,” Health Economics (May, 2007) p.p. 491-511. Available at http://onlinelibrary.wiley.com/doi/10.1002/hec.1176/abstract

45 Médicins Sans Frontières, “The 3P Project,” (February 3, 2014). Available at http://www.msfaccess.org/sites/default/files/TB%20demo%20project%20extended%20version%20For%20Web_12032014.pdf

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49 R. Abbott, “Potential elements of the WHO Global R&D Treaty: tailoring solutions for disparate contexts,” Intellectual Property Watch (January 29, 2013). Available at .http://www.ip-watch.org/2013/01/29/potential-elements-of-the-who-global-rd-treaty-tailoring-solutions-for-disparate-contexts/

50 Universities Allied for Essential Medicines, “Make Medicines for People, Not Profit,” (November, 2015). Available at https://uaem.wufoo.com/forms/make-medicines-for-people-not-for-profit/

51 James Love and Tim Hubbard. “The big idea: prizes to stimulate R&D for new medicines,” Chicago-Kent Law Review, 82: 1520-1554 (2007). Available at http://studentorgs.kentlaw.iit.edu/cklawreview/wp-content/uploads/sites/3/vol82no3/Love.pdf , S.R. 627—The Medical Innovation Prize Fund Act (2013). Available at https://www.congress.gov/bill/113th-congress/senate-bill/627

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